After evaluating the macroeconomic conditions and future outlook, the Monetary Policy Committee (MPC) decided, with 5 out of 6 members in agreement, to maintain the policy rate at 6.5%, according to the RBI Governor. A neutral stance gives the RBI the flexibility to adjust interest rates based on the direction of inflation, contrasting with the current position of withdrawing accommodation, which eliminates the possibility of rate cuts. Shaktikanta Das noted that domestic growth has sustained its momentum, and the global economy has remained resilient since our last meeting. However, downside risks persist due to geopolitical conflicts, financial market volatility, and elevated public debt. On a positive note, world trade is showing signs of improvement. Governor Das further stated that food inflation pressures may ease due to favorable conditions from kharif sowing and good soil moisture. Additionally, it appears that core inflation has bottomed out. However, a recent increase in food and metal prices, if sustained, could contribute to the upward risks of Consumer Price Index (CPI) inflation.
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